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Lords of the grid clash in energy battle

There’s an epic struggle taking place between distributed energy resources and the centralized power grid.

In J. R. R. Tolkien’s “The Lord of the Rings,” the evil Sauron creates “one ring to rule them all.” Unwilling to share power, Sauron is undone by a fellowship of characters who combine their distinct talents to assert a more powerful, more cooperative alternative. 

Are the owners and operators of America’s still largely centralized electric grid willing to share their power with competing, generally cleaner distributed energy generators? Or is their approach more in line with keeping customers captive under the motto of “one grid to rule them all?”

Major U.S. electric utilities, independent power producers, investors, technology developers and researchers convened Wednesday at the GreenBiz Group’s VERGEconference in San Francisco to explore the sometimes complicated relationship between utilities and distributed energy resources.

A decidedly Tolkienesque tone was set by back-to-back sessions, “Crowning the New Grid: How DER [distributed energy resources] Will Create the New Wave Utility” and “Dethroning the Grid: How Microgrids Could Overthrow Utilities."

The two sessions 

The otherwise separate pair of sessions were a continuous part of the same story.

The first considered how innovative utilities are using distributed energy resources like solar and wind to develop new models, services and value for their customers and how customers are teaming up to drive change within utilities. The second examined how distributed microgrids are empowering customers, disrupting the electricity sector and possibly even displacing utilities.

Eastern Washington-based Avista and San Diego Gas & Electric, the two investor-owned utilities on the panels, both count large quantities of renewable energy in their wholesale power supplies and are engaged in some cutting-edge microgrid projects. San Diego Gas & Electric also manages a significant volume of customer-owned distributed solar.

Moreover, the panelists from the two companies seemed like anything but agents of the Dark Lord of Mordor.

“We are planning to be at 33 percent [renewable energy] in 2014,” said Lee Krevat, a director at San Diego Gas & Electric.

That would mean the company is six years ahead of California’s state law mandating utilities to procure 33 percent of their wholesale power from renewables by 2020.

“By the way, that 33 percent doesn’t count any of the rooftop solar in our service territory,” he added, which is more than any other investor-owned utility in California on a per capita basis.

Avista, which is one of the largest purchasers of large-scale wind energy and hydropower resources in the Northwest, does not have a large base of solar-powered customers. But the utility is undergoing a cultural shift and is exploring new distributed energy business models, according to Heather Rosentrater, a director at Avista.

“Utilities are usually seen as a conservative culture and there are reasons for that, given that we’re regulated. But we’ve been really trying to get our culture at our company to be a ‘how might we’ culture,” Rosentrater said, explaining that instead of getting in the way of distributed renewable energy efforts, “We are trying to say, ‘How might we take advantage of this situation?’”

The entire utility industry is facing a fundamental challenge when it comes to its business model, Rosentrater said. Our business model, the utility business model, historically has been based on growth. We are just not seeing that anymore.

Net metering: A looming battle

Panelist Mark Ferron, the former state energy regulator who earlier this year retired from the California Public Utilities Commission, presented his own point of view on the dynamic between utilities and distributed energy.

When leaving the CPUC, Ferron advised his fellow commissioners to beware of pressures to protect utility interests over the interests of energy consumers and solar-powered customers. At the time, he said he suspected the state’s utilities, which he described as “orders of magnitude more enlightened than their brethren in coal-loving states,“ would “still dearly like to strangle rooftop solar if they could.”

On Wednesday, Ferron was less dramatic, but no less to the point in describing “the economic tension of having assets owned by customers that implicitly reduce their consumption.” He predicted “a whale of a wrestling match” in California “in the next year or so or longer around the whole issue of net energy metering,” under which utilities’ solar-powered customers are compensated for their generation.

Ferron said he expects the tension to become more intense once the state starts seeing more significant volumes of distributed storage.

In other words, if the dynamic between utilities and distributed energy were an epic, three-part trilogy, it’s probably still in the early pages, with any outcome possible.

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